Dairy farming industry struggles during COVID

With restaurants and schools closed, the processing plants that put milk into school lunch cartons or create cheese for pizza just don’t need that much milk anymore.

Consumers might be buying more milk at the store, but processing plants, just like manufacturing plants, can’t immediately reconfigure their assembly lines from one dairy product to another.

Dairy farming was in the news even before the pandemic hit. For much of 2018 and for the first quarter of 2019, milk languished below $15 per hundred weight, or 100 pounds of milk. There are about 8.6 pounds of milk in a gallon, according to the USDA.

That $15 represents the Class III or base price. Then farmers get premiums for high butterfat content and other quality measures.

The cost of production varies from farm to farm, but it averages about $17 per hundred weight. For much of 2018 and the first quarter of 2019, milk prices languished below the $15 mark, dropping as low as $13.42. But about a year ago, prices began to go up. In December, they reached $20.18 and then started to drop. When the pandemic hit, they plunged.

On April 1, the price was $16.25 per hundred weight, already below the cost of production. By April 24, it had dropped to $13.20. The Chicago Board of Trade predicts milk prices of about $10.20 in May and $11.95 in June.

With dairy product production down during the COVID outbreak, less milk is needed, but farmers aren’t able to “turn the valve off.” The cows need to be milked and a continuous supply keeps coming, with no place to claim it.

Some farmers may turn to selling cows for meat in an effort to reduce milk production, but that market has taken a dive, too. With meat processing plants slowing down or closing due to COVID-19, the demand isn’t there. Meat producers can offer whatever price per pound they want.

Diet can also be adjusted by giving animals less protein in their ration mix, so the cows don’t go hungry but produce less milk; however, the cows may not return to peak production once the regular diet is resumed.